Small but Impactful: The Growing Role of SMES in Sustainability and ESG Reporting

ABSTRACT Integrating environmental and social practices into small and medium‐sized enterprises (SMEs) remains challenging, particularly, due to limited corporate social responsibility (CSR) implementation and the lack of effective environmental management tools. This study explores the drivers behind sustainability adoption and environmental, social and governance (ESG) disclosure among 196 Italian manufacturing SMEs in the northern region. Using a mixed‐methods approach and PLS‐SEM analysis, the research identifies the main factors influencing SMEs' alignment with the sustainable development goals (SDGs). Results show that corporate beliefs are more influential in guiding sustainability strategies than leaders' personal backgrounds or firm characteristics. Additionally, the availability of sustainability accounting tools and the impact of the COVID‐19 pandemic have accelerated sustainability transitions. The study provides early but significant insights into how SMEs are approaching responsible practices and offers guidance for policymakers and institutions to support this shift. It highlights the urgent need for targeted frameworks that help SMEs fully integrate social and environmental considerations, thus contributing meaningfully to the global SDGs agenda.